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TMI Blog2022 (7) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... stood as personal guarantor in order to secure the repayment of the financial assistance availed by the Corporate Debtor. 3. It is stated that the gist apropos to the case of the Financial Creditor is that Corporate Debtor i.e. Apex Drugs Limited (under Corporate Insolvency Resolution Process) had been granted various credit facilities amounting to Rs. 208,21,65,555.24 Crores (As per Part-III in Form-C) from time to time from the Financial Creditor/SBI. 4. It is stated that after availing the said credit facilities, the Corporate Debtor failed to adhere to sanction terms and neglected to operate loan accounts as per terms and conditions of the restructuring package sanction and as a result the accounts of the Corporate Debtor were classified as Non-Performing Asset (NPA) on 30.06.2013. 5. It is stated that the Financial Creditor thereafter sent a Demand Notice dated 25.04.2014 under Section 13(2) of SARFAESI Act, 2002. Further the Financial Creditor has exercised its rights and remedies against the Respondent No. 1 and 2 under SARFAESI Act, 2002 vide OA No. 338 of 2017 before the Debt Recovery Tribunal-II, Hyderabad for recovery of the outstanding amounts from Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s report on 13.12.2021, and stated in its report that the amount of Debt as on 31.07.2021 as per Form-B, Form of Demand Notice stands at Rs. 208,21,65,555.24 Crores. The Resolution Professional further stated that he did not receive any response from the Personal Guarantor within the stipulated period, however during telephonic discussion with the Personal Guarantor, the Personal Guarantor confirmed that no payment had been made to the Financial Creditor towards the default committed by the Corporate Debtor and lack of resources to pay the amount. Hence the Resolution Professional recommended the admission of the petition filed under Section 95 of the Code. 11. The Respondent had filed an Interlocutory Application No. 177/2022 for setting aside the order dated 17.01.2022 where by the Respondent was set ex-parte. The same was allowed by this Adjudicating Authority vide its order dated 03.03.2022. 12. The contentions as put forth by the Personal Guarantor in the Counter Affidavit are: 12.1. It is stated by the Respondent in its Counter Affidavit that the Financial Creditor was part of the Committee of Creditors (Hereinafter referred as CoC) and had voting share of 70.10%. Pursuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as far as the Corporate Debtor entity is concerned. Therefore, interpreting the said clause that the said extinguishment of the Guarantee is for the personal guarantor would create a scenario which will have adverse cascading effects. It is further denied that clause F in any manner discharges the guarantors of the Corporate Debtor from any future liabilities. 13.3 It is vehemently denied that any liability of the Respondent herein as a personal guarantor of the Corporate Debtor was discharged upon the approval of the Resolution Plan vide order dated 18.12.2019 in Interlocutory Application No. 439 of 2019 in CP(IB) No. 269/9/HDB/2018 and more so any rights of the Applicant herein against the Respondent have been forfeited after according its approval to the said Resolution Plan. 13.4 It is submitted that even after the Resolution Plan of Corporate Debtor being approved, the Financial Creditor is still at the liberty to proceed with filing of an Application under Section 95 to initiate the Insolvency Resolution Process qua Personal Guarantor. It is imperative to mention that the object of Code is to maximize the value of the assets of the Corporate Debtor. The Resolution Plan ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;) in Lalit Mishra & Ors. v. Sharon Bio Medicine Ltd. [Company Appeal Insolvency No. 164 of 2018] dated 14.11.2018, wherein the Appellate Tribunal held that the guarantor cannot exercise its right of subrogation under the Indian Contract Act, 1872 as proceedings under the Code are not recovery proceedings. The object of the proceedings under the Code is to revive the company and focus on maximization of value of its assets and not to ensure that credit is available to all stakeholders. 13.9 It is stated that the Resolution Professional in his report had stated that the Respondent herein has not made any payment to the Financial Creditor. Further, the Resolution Professional in his report has clearly mentioned that the Respondent informed the him that Respondent does not have resources to pay the outstanding amount. 13.10 It is stated that the Hon'ble Supreme Court in the matter of Lalit Kumar Jain v. Union of India [Transferred Case (Civil) No. 245/2020)] decided on 21.05.2021, wherein it was held: "111. In view of the above discussion, it is held that approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report as per Section 99 of the Code. The Resolution Professional submitted the report with his recommendation to admit the application filed by Financial Creditor herein. 17.2. The Financial Creditor/Applicant in its submissions averred that even after Resolution Plan of Corporate Debtor being approved the Financial Creditor is still at liberty to proceed with filing of application under Section 95 to initiate Interim Resolution Process qua Personal Guarantor. The Applicant further submitted that Resolution Plan submitted by Corporate Debtor is not for recovery but for revival of Corporate Debtor. Hence the Creditors retain the right to proceed against the Personal Guarantors of Corporate Debtor separately. 17.3. It is a settled position of law, the liability of Personal Guarantors are co-extensive with that of Principal Borrower. As per the Section 134 of the Indian Contract Act, 1872 a guarantor is discharged of its liability towards the creditor only if the creditor on its own instance discharges the Principal Debtor. The main ingredient of this section is discharge of the debtor through voluntary act of creditor and not due to operation of law. 17.4. The Financial Creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive in nature and that claims of similar amounts could be submitted by the financial creditor in all the CIRPs." 17.8. Therefore, the Financial Creditor has submitted that the conclusion of Corporate Insolvency Resolution Process even by Resolution Plan /Revival does not bar Creditor to proceed against the guarantors and the Financial Creditor can always approach Adjudicating Authority as envisaged under the Code. The Financial Creditor has further submitted that the Reliefs and Concessions whereby the Resolution Applicant seeks certain reliefs from the Adjudicating Authority as far as Corporate Debtor is concerned is very much in light with the clean slate theory and this was sought for the qua the Corporate Debtor for smooth functioning of this Corporate Debtor, which are in line with aim and objective of the Code. 17.9. It is also pertinent to note that any relief sought for the ex-management would eventually cast a doubt upon the independence of the Resolution Applicant vis-à-vis Suspended Management. Therefore, the Financial Creditor has submitted that the said Clause-F of Resolution Plan clearly depicts the intention of Resolution Applicant of seeking reliefs and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plan. 17.15. However, Financial Creditor has approached this Adjudicating Authority and filed the present application by suppressing essential facts and with an intention to unlawfully hold the Personal Guarantor liable for past and settled dues. They further contended that the Financial Creditor herein has filed the present application purely with an intention to cause irreparable harm to the Personal Guarantor and harass the Personal Guarantor whose liability as Personal Guarantor of the Corporate Debtor was discharged after approval of Resolution Plan. 17.16. Therefore, in light of the above submissions the Personal Guarantor herein has contended the application deserves to be dismissed in limine with exemplary costs indulging in such frivolous applications and misguiding the Adjudicating Authority. 17.17. We have gone through records and submissions made by Financial Creditor as well as Personal Guarantor. We have also gone through the case laws submitted by Applicant herein in Lalit Misra [Supra] and also Lalit Kumar Jain v. Union of India [Supra] 17.18. Therefore, we are also of the view that conclusion of Corporate Insolvency Resolution Plan does not bar Financial Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Interlocutory Application was allowed by this Adjudicating Authority vide order dated 04.04.2022 18. Therefore, by exercising powers under Section 100 of the Code, we pass the following orders: (1) The petition i.e. CP (IB) No. 297/95 of IBC/HDB/2021 filed under the provisions of Section 95 of IBC, 2016 is hereby admitted and Personal Guarantor Shri. Ghanshyam Surajbali Kurmi is hereby declared as insolvent. (2) Consequently, the Insolvency Resolution Process is hereby initiated against the Personal Guarantor Shri. Ghanshyam Surajbali Kurmi/Personal Guarantor and the moratorium is declared, which begins with effect from the date of admission of the petition and shall cease to have effect at the end of the period of 180 days, as provided under Section 101 of the Code During the moratorium period; (a) Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed; (b) The creditors shall not initiate any legal action or legal proceedings in respect of any debt; and (c) the debtor shall not transfer, alienate, encumber or dispose of any of her assets or her legal rights or beneficial interest therein; (d) The provisions of this Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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